Competitive Advantage of Nations

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Michael E. Porter, one of the world's leading authorities on competitive strategy and international competitiveness, is the C. Roland Christensen Professor of Business Administration at the Harvard Business School. In 1983, Professor Porter was appointed to President Reagan's Commission on Industrial Competitiveness, the initiative that triggered the competitiveness debate in America. He serves as an advisor to heads of state, governors, mayors, and CEOs throughout the world. The recipient of the Wells Prize in Economics, the Adam Smith Award, three McKinsey Awards, and honorary doctorates from the Stockholm School of Economics and six other universities, Porter is the author of fourteen books, among them "Competitive Strategy, The Competitive Advantage of Nations, " and "Cases in Competitive Strategy, " all published by The Free Press. He lives in Brookline, Massachusetts.

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Auteur

Michael E. Porter, one of the world's leading authorities on competitive strategy and international competitiveness, is the C. Roland Christensen Professor of Business Administration at the Harvard Business School. In 1983, Professor Porter was appointed to President Reagan's Commission on Industrial Competitiveness, the initiative that triggered the competitiveness debate in America. He serves as an advisor to heads of state, governors, mayors, and CEOs throughout the world. The recipient of the Wells Prize in Economics, the Adam Smith Award, three McKinsey Awards, and honorary doctorates from the Stockholm School of Economics and six other universities, Porter is the author of fourteen books, among them Competitive Strategy, The Competitive Advantage of Nations, and Cases in Competitive Strategy, all published by The Free Press. He lives in Brookline, Massachusetts.

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With "Competitive Strategy" and "Competitive Advantage", Michael Porter established himself as a leading authority on competitive advance. Now, he builds on the ideas of his earlier works to explore what makes a nation's firms and industries competitive in global markets and what propels national economic development.

Résumé
Now beyond its 11th printing and translated into twelve languages, Michael Porter's The Competitive Advantage of Nations has changed completely our conception of how prosperity is created and sustained in the modern global economy. Porter's groundbreaking study of international competitiveness has s

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Chapter 1

The Need for a New Paradigm

Why do some nations succeed and others fail in international competition? This question is perhaps the most frequently asked economic question of our times. Competitiveness has become one of the central preoccupations of government and industry in every nation. The United States is an obvious example, with its growing public debate about the apparently greater economic success of other trading nations. But intense debate about competitiveness is also taking place today in such "success story" nations as Japan and Korea. Socialist countries such as the Soviet Union and others in Eastern Europe and Asia are also asking this question as they fundamentally reappraise their economic systems.

Yet although the question is frequently asked, it is the wrong question if the aim is to best expose the underpinnings of economic prosperity for either firms or nations. We must focus instead on another, much narrower one. This is: why does a nation become the home base for successful international competitors in an industry? Or, to put it somewhat differently, why are firms based in a particular nation able to create and sustain competitive advantage against the world's best competitors in a particular field? And why is one nation often the home for so many of an industry's world leaders?

How can we explain why Germany is the home base for so many of the world's leading makers of printing presses, luxury cars, and chemicals? Why is tiny Switzerland the home base for international leaders in pharmaceuticals, chocolate, and trading? Why are leaders in heavy trucks and mining equipment based in Sweden? Why has America produced the preeminent international competitors in personal computers, software, credit cards, and movies? Why are Italian firms so strong in ceramic tiles, ski boots, packaging machinery, and factory automation equipment? What makes Japanese firms so dominant in consumer electronics, cameras, robotics, and facsimile machines?

The answers are obviously of central concern to firms that must compete in increasingly international markets. A firm must understand what it is about its home nation that is most crucial in determining its ability, or inability, to create and sustain competitive advantage in international terms. But the same question will prove to be a decisive one for national economic prosperity as well. As we will see, a nation's standard of living in the long term depends on its ability to attain a high and rising level of productivity in the industries in which its firms compete. This rests on the capacity of its firms to achieve improving quality or greater efficiency. The influence of the home nation on the pursuit of competitive advantage in particular fields is of central importance to the level and rate of productivity growth achievable.

But we lack a convincing explanation of the influence of the nation. The long-dominant paradigm for why nations succeed internationally in particular industries is showing signs of strain. There is an extensive history of theories to explain the patterns of nations' exports and imports, dating back to the work of Adam Smith and David Ricardo in the eighteenth century. It has become generally recognized, however, that these theories have grown inadequate to the task. Changes in the nature of international competition, among them the rise of the multinational corporation that not only exports but competes abroad via foreign subsidiaries, have weakened the traditional explanations for why and where a nation exports. While new rationales have been proposed, none is sufficient to explain why firms based in particular nations are able to compete successfully, through both exporting and foreign investment, in particular industries. Nor can they explain why a nation's firms are able to sustain their competitive positions over considerable periods of time.

Explaining the role played by a nation's economic environment, institutions, and policies in the competitive success of its finns in particular industries is the subject of this book. It seeks to isolate the competitive advantage of a nation, that is, the national attributes that foster competitive advantage in an industry. Drawing on my study of ten nations and the detailed histories of over one hundred industries, I will present in Part I a theory of the competitive advantage of nations in particular fields. In Part II, I will illustrate how the theory can be employed to explain the competitive success of particular nations in a number of individual industries. In Part III, I will use the theory to shed light on the overall patterns of industry success and failure in the economies of the nations we studied and how the patterns have been changing. This will serve as the basis for presenting a framework to explain how entire national economies advance in competitive terms. Finally, in Part IV, I will develop the implications of my theory for both company strategy and government policy, The book concludes with a chapter entitled "National Agendas," which illustrates how the theory can be used to identify some of the most important issues that will shape future economic progress in each of the na…